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Informist, Monday, Dec. 1, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended sharply down across tenures Monday as traders unwound bets of a 25-basis-point rate cut by the Reserve Bank of India's Monetary Policy Committee Friday. India's GDP growth of 8.2% for the September quarter was 100 basis points higher than the Informist poll estimate, reducing the need for policy easing. During the day, a rise in overnight indexed swap rates and a slump in the rupee to a record low also dragged down prices. Supply-side concern also soured sentiment, as states aim to raise nearly 50% more than indicated in the state borrowing calendar Tuesday, dealers said. 

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.62, or 6.53% yield, against INR 99.80, or 6.51% yield Friday. The most traded 6.33%, 2035 gilt ended at INR 98.31, or 6.57% yield, against INR 98.49, or 6.55% yield, in the previous session. The 6.33%, 2035 gilt yield closed at its highest since Sept. 30. Short-term bonds were sharply down, as traders had piled on to these bonds last week, on bets of a rate cut Friday. 

 

"Market has made peace with it, that the probability of a rate cut (on Friday) is very low," a trader at a primary dealership said. "And even if there's a rate cut it's going to be the last cut. Which means that there'll be selling post the cut. So only thing that's keeping prices in check is expectations of OMO (open market operations to buy gilts through auction), so if they disappoint even on that front, then yields will pick up 7-8 basis (points)."

 

 

Several traders do not expect the MPC to cut rate Friday but instead expected the RBI to announce a calendar of open market gilt purchases through auction. Traders expect OMOs of INR 2.00 trillion to INR 3.00 trillion and anything lesser is unlikely to pull bond yields lower since OMOs of INR 1.5 trillion have been priced in, dealers said. 

 

Traders largely expect the voting pattern of the six-member panel to be unanimous. Traders do not expect the panel to change its stance nearing the end of the rate cut cycle but said that change of stance to 'accomodative' from 'neutral' will be the only strong cue that would decisively pull down bond yields by around 10 basis points, dealers said.   

 

The 6.33%, 2035 bond yield may rise till 6.60% this week, dealers said. However, at 6.60%, value buyers will step in to buy gilts on hopes of some support to lower bond yields from the RBI. In case the MPC does cut the repo rate by 25 bps but the RBI does not announce an OMO calendar, bond yields are seen rising in the near term. If the RBI doesn't deliver either on softer policy or on liquidity support, the 6.33%, 2035 bond yield can rise to 6.70%, dealers said. Traders expect the tone and commentary of the rate-setting panel to indicate support through further rate cuts or other measures. At the June policy decision, the MPC cut rates by 50 bps but the tone of the panel sent bond yields soaring. 

 

During the day, state-owned banks likely bought gilts in small quantums, while primary dealerships and foreign banks were likely on the selling side, dealers said. Traders also have to make room for fresh supply of the 10-year 6.48%, 2035 gilt on Friday, the same day as the policy outcome. 

 

Heavy state bond supply weighed on bond prices, along with the fall of the rupee to a record low of 89.7825 per $1, dealers said. Some traders hit stop-losses on gilts after the 10-year 6.33%, 2035 gilt yield broke technical levels of 6.55% and 6.57% Monday, dealers said. Stop-losses also triggered a rise in the five-year overnight indexed swap rate to the day's high of 5.81%. 

 

Bond purchases of around INR 120 billion from the Deposit Insurance and Credit Guarantee Corp., a wholly-owned subsidiary of the RBI, have likely ended, dealers said. The institution likely bid for INR 40 billion to INR 50 billion of the seven-year gilt at Friday's auction. The 'others' segment of gilt market participants, which consists of the Deposit Insurance and Credit Guarantee Corp., insurance companies and provident funds among others, net bought gilts worth INR 63.35 billion from Wednesday to Friday. 

 

Turnover in the gilts market was INR 485.50 billion, slightly higher than INR 436.85 billion in the previous session, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the RBI's wholesale e-rupee pilot Monday, the same as Friday.

 

OUTLOOK

On Tuesday, bond prices may open lower as traders make room for fresh supply of state bonds. Focus will primarily be on MPC this week. Bond prices may also track the overnight movement of US Treasury yields. The yield on the 10-year benchmark US Treasury note was 4.05% at 1700 IST, from 4.00% at the same time Friday. On the global front, traders will look to the US Federal Open Market Committee's decision later in the month. Traders also await any news of the next US Federal Reserve chair appointee, as current Chair Jerome Powell's term ends in May. 

 

Movement in crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.50-6.57% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.50-6.65%.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.6200	6.5314%	99.8000	6.5063%
6.33%, 2035	98.3050	6.5732%	98.4900	6.5463%
6.01%, 2030	98.9825	6.2640%	99.1250	6.2278%
6.68%, 2040	97.4300	6.9622%	97.6500	6.9376%
6.90%, 2065	93.3025	7.4263%	93.7000	7.3932%

 

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India Gilts: Fall more as rupee slumps; 6.01%, 2030 gilt yield up over 3 bps

 

	1423 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.62	99.83	99.57	99.70	99.80
YTM (%)	6.5314	6.5021	6.5384	6.5202	6.5063

 

	1423 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.31	98.49	98.26	98.43	98.49
YTM (%)	6.5724	6.5463	6.5797	6.5550	6.5463

 

	1423 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.01%, 2035
PRICE (INR)	98.99	99.14	98.91	99.14	99.13
YTM (%)	6.2621	6.2241	6.2823	6.2241	6.2278

 

MUMBAI--1423 IST--Prices of government bonds fell further as the rupee slumped to a fresh low of 89.7825 against the dollar, dealers said. The most traded 6.33%, 2035 bond yield rose above the psychologically crucial level of 6.57%, and is likely to hit a two-month high of 6.60% in the near term, dealers said. The fall was limited on value-buying at levels seen lucrative on hopes of Reserve Bank of India support, dealers said.

 

The benchmark five-year 6.01%, 2030 gilt was sharply down, as some traders unwound bets of a 25 basis point rate cut Friday. The bond yield Monday topped 6.28%, the highest since Sept. 12. Others said that traders who were stuck with the illiquid 5.91%, 2028 and 6.28%, 2032 gilts bought at Friday's auction, sold the five-year benchmark gilt.

 

Traders further unwound bets of a rate cut by the RBI's Monetary Policy Committee after the rupee hit a record low Monday, as the rate-setting panel may avoid cutting rates Friday due to the risk to the local currency, dealers said. The absence of an announcement of an India-US trade deal so far is seen as a positive for bond prices due to concerns of slower economic growth, but at the same time, is leading to currency depreciation, dealers said. Several traders were expecting a deal between the two countries by the end of November. At its policy meeting in October, the RBI's rate-setting panel had flagged concerns about risks to economic growth due to the trade tariffs.

 

Some traders hit stop-losses on gilts after the 10-year 6.33%, 2035 gilt yield broke technical levels of 6.55% and 6.57% Monday, dealers said. Traders are divided on the outcome of the MPC meeting this week, and positioning before the key event is seen dicey, especially due to INR-320-billion fresh supply of a 10-year gilt Friday. A rise in overnight indexed swap rates also aided the fall in bond prices. The five-year OIS hit 5.81%, its highest since Sept. 3.

 

Heavy state bond supply also weighed on bond prices, with no relief seen in the next few months, dealers said. Yield spreads of 10-year state bonds over the 10-year benchmark 6.48%, 2035 gilt is seen at around 80 basis points Tuesday.

 

"If it (6.33%, 2035 gilt yield) has to go to 6.60%, it'll go either Monday or Tuesday," a dealer at a private sector bank said. "Because if state (bond) auction doesn't go through, we'll see further pain. But, closer to MPC (meet), at 6.58-6.60% (yield) levels I'd go long because RBI is not comfortable with such high yields, they will come with some support at these levels."

 

At 1352 IST, the turnover in the gilts market was INR 304.55 billion, up from INR 110.45 billion at 1330 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.48-6.55% while that on the 6.33%, 2035 bond is seen moving in a range of 6.52-6.60% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Off lows on bets of soft MPC tone, OMO auctions; dn on high GDP

 

	0938 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.76	99.83	99.70	99.70	99.80
YTM (%)	6.5119	6.5021	6.5202	6.5202	6.5063

 

	0938 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.44	98.49	98.39	98.43	98.49
YTM (%)	6.5535	6.5463	6.5608	6.5550	6.5463

 

MUMBAI--0938 IST--Prices of government bonds were off lows on bets of a soft policy outcome at the conclusion of the Reserve Bank of India's Monetary Policy Committee meeting Friday. Traders also bet on the RBI announcing a calendar of open market purchase of gilts through auction. Bond prices opened lower due to heavy state bond supply this week, and some traders unwound bets of a rate cut by the MPC. Bets of a 25 basis point rate cut Friday reduced as India's GDP growth of 8.2% for Jul-Sept was much higher than estimated. 

 

Traders are betting on the tone of the rate-setting panel and of RBI Governor Sanjay Malhotra to indicate scope for easing monetary policy Friday. While some traders do not expect a rate cut at the MPC outcome post the high GDP print, the disappointment is being offset by hopes of the RBI announcing an open market operation calendar to purchase gilts through auctions. While the announcement is expected Friday, traders largely expect such auctions to begin either at end of this month or in January. Traders have been expecting OMO auctions to the tune of INR 1.5 trillion in Jan-Mar for the past two months, and have priced in such a quantum. Now, they expect a greater number of INR 2.00 trillion to INR 3.00 trillion to pull bond yields down, dealers said. Some bets of a rate cut this week persist, because RBI officials had said at the October policy meeting that while Jul-Sept growth may be strong, the growth trajectory from the December quarter could weaken due to external risks, dealers said.

 

"Going into MPC, there will be some positivity, people have some expectations of a soft commentary, or a rate cut," a dealer at a state-owned bank said. "The MPC has to cut rates now, to frontrun the impact of tariffs, etc. If it can't cut now, then later on it won't get a chance to cut (the repo rate)."

 

Heavy state bond supply Tuesday weighed on prices. Thirteen states will raise INR 313.50 billion through bonds Tuesday, nearly 50% higher than INR 210.00 billion indicated in states' borrowing plan for Oct-Dec. This is the largest quantum being raised through a single auction so far in this quarter. This has increased traders' fears of heavy state bond supply, a seasonal occurence seen nearing the end of the financial year.

 

At 0938 IST, the turnover in the gilts market was INR 54.05 billion, up from INR 11.95 billion at 0930 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.48-6.55%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.60% for the rest of the day.  (Cassandra Carvalho)

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India Gilts:Seen dn on high GDP, state bond supply; OMO bets to limit losses

 

MUMBAI – Prices of government bonds are seen opening lower Monday due to high supply of state bonds Tuesday, along with fading bets of a rate cut this week after India's GDP growth of 8.2% for Jul-Sept was 100 basis points higher than an Informist poll estimate. However, low nominal GDP growth for the same period, along with bets of an open market operations calendar, and expectations of a soft tone and commentary by the Reserve Bank of India's Monetary Policy Committee on Friday are likely to limit losses.

 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.48-6.55% after ending at INR 99.80, or 6.51% yield, Friday. The yield on the most traded 6.33%, 2035 bond is seen at 6.50-6.60%, against INR 98.49, or 6.55% yield in the previous session. 

 

Post market hours Friday, the RBI said 13 states would raise INR 313.50 billion through bonds Tuesday, nearly 50% higher than INR 210.00 billion indicated in states' borrowing plan for Oct-Dec. This is the largest quantum being raised through a single auction so far in this quarter. This has raised traders' fears of heavy state bond supply, a seasonal occurence seen nearing the end of the financial year. Further, fresh supply of INR 320 billion of a 10-year gilt on Friday, the same day as the policy outcome, may weigh, dealers said. Sentiment is likely to be further dampened after the RBI said it will conduct a four-day variable rate reverse repo auction for INR 750 billion Monday, the first VRRR since Nov. 14.

 

Traders were largely pricing in a 25 bps rate cut by the MPC Friday, until those hopes were dashed after India's GDP growth was much stronger than expected. However, the rise in the 10-year 6.33%, 2035 bond yield is seen capped at 6.55-6.56%. A few traders expect bond prices to open higher, since the fall in prices Friday was too sharp, they said. Going into the policy decision end of this week, bond prices may rise on optimism of a rate cut, since nominal GDP is lower than the budgeted estimate, dealers said. India's nominal GDP growth was 8.7% in Jul-Sept, higher than 8.3% a year ago. The Union Budget had forecast nominal GDP growth of 10.1% in 2025-26 (Apr-Mar).

 

Hopes of the announcement of an open market calendar to purchase gilts through auction are also gaining momentum, and traders now hope for OMOs in the range of INR 2.00 trillion to INR 3.00 trillion, against INR 1.50 trillion earlier. Traders also expect the central bank to downgrade its CPI forecasts on Friday due to the Centre's recent cut in goods and services tax, and a near-zero inflation print in October. 

 

The yield on the 10-year US Treasury note was 4.04% at 0800 IST, against 4.00% at 1700 IST Friday. US yields rose in thin trade Friday, amid wide bid and ask spreads during a technological outage at the Chicago Mercantile Exchange. (Cassandra Carvalho)

 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

 

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